[CPEO-BIF] Subsidies

[Peter B. Meyer]

Bill Cocose's point about assessed values is exceptionally well taken -- 
but incomplete. There are, indeed, states in which it is very difficult 
to discharge old tax debts in the case of redevelopment of abandoned, 
and thus tax delinquent, sites. In such cases, the burden accumulated 
from those tax obligations can, as he points out, add to the financial 
burdens carried by a brownfield site.

However, there is another side to the issue. In other instances, 
especially with warehoused small sites, some of which are held on spec 
against expected property value increases, the carrying cost for holding 
a site off the market would be depressed by reassessments to close to 
zero for un- or under-utilized sites. In Kentucky, for example, some 
cities were pressing for the right to assess a higher tax rate burden on 
vacant unused brownfield sites as a means of getting access and forcing 
sites onto the market. 

The problem really is that there are few, if any formulaic solutions or 
responses that make sense. The real need is for tailored responses - and 
for subsidies where needed, but not as automatic grants. The problem, 
then, is that such responses require data, and we have not been willing 
to demand information from business applicants requesting public 
support, while we have always required it from individuals and families. 
"Need-based assistance" is acceptable as a basis for providing welfare 
or supplemental security income to the elderly -- why isn't it equally 
appropriate for developers?

There is also no reason  not to require some sort of assurance of public 
benefit as a condition of that assistance. To continue the welfare 
analogy, we evolved "workfare," in which people had to show that they 
were making an effort to get themselves beyond dependency. We could, 
logically, require a similar demonstration of environmental or other 
socially beneficial outcoems from brownfield developers, and we might 
even penalize them after the fact for nonperformance.

We do not need to look to welfare for an analogous program, but to the 
economic developemnt experience with "clawbacks." These are conditions 
imposed on various forms of state support for economic development 
projects, in which the developers or new firms promise some number or 
jobs or total payroll in return for some subsidies. States, dating back 
to the 1970s, monitored development project performances and implemented 
clawbacks of different sorts, and this did not seem to acutely 
discourage investment. (A typical clawback might be a higher interest 
rate on a low interest loan proviced in response to a commitment to 
generate a specific number of jobs, if the target jobs were not created.)

In the brownfield case, the performance measure could be the site 
remedial response, and the pollution abatement condition attained. This 
is an outcome that is more under a developer's control than the number 
of jobs generated by a company, and one that can be attained regardless 
of  the unknowns of economic condition or real estate market changes.  
Such a clawback provision need thus need not add to the uncertainty 
prospective developers would face, and could actually save investors 
time and money by providing community representatives, who might 
otherwise be a real thorn in brownfield redevelopers' sides, with some 
assurance about the environmental performance the project will deliver. 
Reduced community resistance can speed project approvals and safe money.

-- All in call, this is an excellent and important debate to have, and I 
am very pleased to see that CPEO has hosted the discussion thus far.

Peter
- - - - - - - -
Peter B. Meyer
Professor Emeritus of Urban Policy and Economics
Director, Center for Environmental Policy and Management
School of Urban and Public Affairs
University of Louisville
 - - - - - - - -
Director of Applied Research
Institute of Public leadership and Public Affairs
Northern Kentucky University
- - - - - - - -
Senior Advison, E2 Inc.
- - - - - - - -
President, The E.P. Systems Group, Inc.
- - - - - - - -
Managing Member, Ecofun, LLC
- - - - - - - -
cell         502-435-3240
phone     859-491-9298
fax          859-491-9252
skype      pbmeye02 or 859-648-0373
- - - - - - - -
3205 Huntersridge Lane
Taylor Mill, KY 41015
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.cpeo.org/pipermail/brownfields-cpeo.org/attachments/20061026/5e0d65c5/attachment-0007.htm>